OWNERSHIP OF PUBLIC UTILITIES

 SUBJECT TO REGULATION BY THE STATE

o Exercise of Police Power (Sec. 6, Art. XII, 1987 Consti.)
o May impose certain requirements (Capitalization, etc.)
o No franchise, certificate or any form of authorization for the
operation of a public utility shall be granted except to citizen
of the Philippines or to corporations or associations
organized under PH Law at least 60% of whose capital is
owned by PH citizens, nor such franchise, certificate or
authorization be exclusive in character for a period
longer than 50 years. (Sec. 11, Article XII, 1987 Consti.)

 TIME WHEN OWNERSHIP MUST COMMENCE

o Moment to determine – when it applies for a franchise,
certificate or any other form of authorization for that
purpose (Tatad v. Garcia, Jr.)
o The Constitution does NOT prohibit the mere formation of a
corporation without the required formation of Filipino
capital. Rather, it prohibits the acquisition of a franchise or
any form of authorization for operation of any public utility
by a CORPORATION ALREADY EXISTING without the
required proportion of Filipino capital stock. (People v.
Quasha)
 VOTING CONTROL TEST AND BENEFICIAL OWNERSHIP TEST
o Both tests must be applied to determine whether the
corporation is a PH national (Gamboa v. Tevez)
 “Applying the foregoing, particularly the Control Test,
MLRC is deemed as a Philippine national because: (1)
sixty percent (60%) of its outstanding capital stock
entitled to vote is owned by a Philippine national, the
Trustee; and (2) at least sixty percent (60%) of the ERF
will accrue to the benefit of Philippine nationals. Still
pursuant to the Control Test, MLRC’s investment in
60% of BFDC’s outstanding capital stock entitled to
vote shall be deemed as of Philippine nationality,
thereby qualifying BFDC to own private land.

Further, under, and for purposes of, the FIA, MLRC and
BFDC are both Philippine nationals, considering that:
(1) sixty percent (60%) of their respective
outstanding capital stock entitled to vote is owned
by a Philippine national (i.e., by the Trustee, in the
case of MLRC; and by MLRC, in the case of BFDC);
and (2) at least 60% of their respective board of
directors are Filipino citizens.”

 “This SEC en banc ruling conforms to our 28 June 2011

Decision that the 60-40 ownership requirement in
favor of Filipino citizens in the Constitution to engage
 in certain economic activities applies not only to voting
control of the corporation, but also to the beneficial
ownership of the corporation. Thus, in our 28 June
2011 Decision we stated:

Mere legal title is insufficient to meet the 60 percent

Filipino owned "capital" required in the Constitution.
Full beneficial ownership of 60 percent of the
outstanding capital stock, coupled with 60 percent of
the voting rights, is required. The legal and beneficial
ownership of 60 percent of the outstanding capital
stock must rest in the hands of Filipino nationals in
accordance with the constitutional mandate.
Otherwise, the corporation is "considered as non-
Philippine national[s]."

 “Both the Voting Control Test and the Beneficial

Ownership Test must be applied to determine whether
a corporation is a "Philippine national."

o Full beneficial ownership of the stocks, coupled with voting

rights is essential
o Must be imposed to afford “effective control” to PH
stockholders
 o Must apply uniformly and across the board to all classes of
shares, regardless of nomenclature and category, comprising
the capital of the company
o Implementing Guidelines - SEC Memorandum Circular No. 8
s. 2013

 OWNERSHIP OF FACILITIES
o Constitutional limit does not apply to facilities
o Right to operate a public utility may exist independently and
separately from ownership of the facilities thereof (Tatad v.
Garcia, Jr.)
o Corporation not subject to the 60% rule if it will just own the
equipment or properties that will be used by another entity
which shall operate as a public utility
o Mere owner and lessor of facilities used by a public utility is
NOT a public utility (US Jurisprudence)